Oil at $100: how will it affect economy?

1 May, 2019

Brent crude has risen about 33 percent this year and is close to the highest in six months. While higher prices due to strong demand typically reflects a robust world economy, a shock from constrained supply is a negative.

1. What does it mean for global growth?

The impact will vary. Rising oil prices will hurt household income and spending and it could accelerate inflation. As the world’s biggest importer of oil, China is vulnerable, and many countries in Europe also rely on imported energy.

2. How can the world economy absorb oil at $100?

Analysis by Oxford Economics found that Brent at $100 per barrel by the end of 2019 means the level of global gross domestic product would be 0.6 percent lower than currently projected by end-2020, with inflation on average 0.7 percentage points higher.

3. How will Iran and Trump impact the market?

An upending of global oil trade around the Iran-Trump spat could continue to have a sizable impact on financial markets, as the affected supply is as much as 800,000 barrels a day. Uncertainties around availability have already whipsawed oil markets. And the political sensitivities of these developments have other markets bracing for volatility.

4. Who wins from higher oil prices?

Emerging economies dominate the list of oil-producing nations which is why they’re affected more than developed ones. The increase in revenues will help to repair budgets and current account deficits, allowing governments to increase spending that will spur investment. Winners include Saudi Arabia, Russia, Norway, Nigeria and Ecuador according to analysis by Nomura.

5. Who loses?

Those emerging economies nursing current account and fiscal deficits run the risk of large capital outflows and weaker currencies, which in turn would spark inflation. Nomura’s losers list includes Turkey, Ukraine and India.

6. What does it mean for the world’s biggest economy?

While U.S. oil producers try to take advantage of any sales boost from customers moving away from Iran, the broader U.S. economy won’t necessarily see benefits with oil price tags as high as $100 a barrel. It would be a squeeze on American consumers that are the backbone of still-steady economic growth.

7. Will it lead to higher inflation around the world?

Because energy features prominently in consumer price gauges, policy makers look to core indexes that remove volatile components. If the run-up in prices proves to be substantial, and sustained, those costs will filter through to transportation and utilities.

8. What does it mean for central banks?

Led by the Federal Reserve, central banks around the world have taken a dovish tilt as the absence of inflation allows policy makers to shift their focus to slowing growth. That’s unlikely to quickly change. The International Monetary Fund this month lowered its global growth forecast and said the world is in a “delicate moment.”


Source link  
Oil sector will lose 95% by 2050

Companies in the oil and gas sector, including large groups such as Shell, BP and Exxon, could lose 95% of their value by 2050 if governments...

The US economy recession by 2021

In a recent survey, most business economists believe the U.S. will fall into recession by 2021. Days after the market euphoria over a ceasefire in the...

Fed plans some further hikes

The U.S. Federal Reserve raised interest rates on Wednesday, as expected, but forecast fewer rate hikes next year and signaled its tightening cycle is nearing...


Pound to remain in Limbo

The British pound hit its lowest level in over 20 months yesterday before recovering in today's trading session on the back of a decision by British Prime...

Stocks Fall Amid China Worries

European stocks slid, following a retreat in Asia, amid growing concerns about a slowdown in China and policy makers steps to address it. The dollar advanced...

Why $70 is so Important for Brent

October was a brutal month not only for the U.S. IT-Companies. Crude oil prices also had significant and important shifts. After renewing the 4-year highs...


Is the 'extreme fear' over now?

Chinese equities are developing a rebound on Friday, supported by the hopes for progress in China and the US trade negotiations. The telephone...

Dollar is waiting for what Powell says

The U.S. dollar has returned to growth on the comments from the Fed officials about the need of further rates increases this year and next one. At the end...

Toxic lira can push euro to $1.04

The collapse of the Turkish lira spreads its toxic influence on the European and EM financial markets. Asian bourses have been losing more than 1% at Monday...

  


Share it on:   or